Wren-Lewis and the dangerous MMT

4 Mar, 2018 at 11:26 | Posted in Economics | 7 Comments

Professor Simon Wren-Lewis recently wrote: “The dangers of pluralism in economics: the case of MMT” …

mmtWren-Lewis argues that MMT concepts can be explained using mainstream terminology. Since I tend to use fairly standard terminology, I cannot disagree with that argument. However, I would phrase it differently. Mainstream discussion of fiscal policy is almost invariably clouded with theoretical junk (“fiscal sustainability”, “budget constraints”, “intergenerational transfer”, “bond vigilantes”) that it takes considerable effort to strip the junk out to get the correct description, which almost always ends up being the MMT description. The MMT jihad against various phrasings and framing terms reflects the need to think clearly about fiscal policy …

Modern Monetary Theory is evolving outside the journals that are locked down by the mainstream, and is focussed on real economic issues. Meanwhile, the mainstream is using dubious mathematics to painfully re-derive results that have been part of the post-Keynesian tradition for decades. You do not need a degree in the history of the philosophy of science to guess what the outcome is going to be. What we are seeing is the inevitable blowback of the attempt to stifle debate; since criticism cannot work through academic channels, it is instead funneled through non-academic ones.

Brian Romanchuk

7 Comments

  1. Lars Syll or others might like to review this book – Abolish Money (From Economics)! Kindle Edition by Brian Romanchuk https://www.amazon.com/dp/B01N4T8R96/ref=cm_sw_r_fa_dp_t2_RupPyb693EW06

    Comment by @LarsDenmar— 5 Mar, 2018 #

  2. My resource page on MMT – for people interested in learning more about MMT. – http://homosociologicus.com/neoliberalism-3

    Comment by @LarsDenmar— 5 Mar, 2018 #

  3. “I disagree with MMT that taxes withdraw money from the economy because the tax money is either immediately spent or invested and therefore spent by banks”
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    And when government is running a surplus?
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    “I also disagree with MMT about a Job Guarantee; I prefer basic income”
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    Which ends up being stealing from the workers in some way. All Basic income ideas require some sort of slave class that is required to work. Why would a farmer work beyond Tuesday to produce for you unless you are giving up your time in the same way?

    Comment by NeilW— 5 Mar, 2018 #

    • “And when government is running a surplus?”

      Consider Norway which has a sovereign wealth fund. The surplus is invested and circulates through the financial system, gets multiplied arbitrarily by banks and dealers as they expand their balance sheets, and makes its way back into the real economy via interest payments and bank profits that bankers can spend on buying politicians, economists, all the land, etc.

      “Why would a farmer work beyond Tuesday to produce for you unless you are giving up your time in the same way?”

      If the farmer doesn’t want to work, he should get a basic income. Let me grow my own food. Government should make public land available to me to self-provision if markets fail because of a basic income. The farmer would be throttling production capacity out of spite; let me produce for myself then. Challenge people to develop automatic farming techniques (the other day I read an article about fully-automated wheat farming using drones and automated watering …) so we can provision for ourselves without needing only profit-seeking neoliberal farmers.

      Comment by Robert Mitchell— 5 Mar, 2018 #

      • P,S,. Most jobs are unnecessary anyway. Consider Professor Syll’s blogs that debunk the work that economic professors do, for example. He says the members of his department, after being shown how useless their work is, asked “but what then shall we do?” Put them on a basic income and they would do less harm than they do now, propagating models that result in harmful public policies. If the farmer will only sell food to those who are doing more harm than good with their work, then our system is badly messed up already. We should make a system where farmers grow food because they want to, because they like to. If I want food and no one will grow it for me, then at least let government policies allow me to grow food for myself on public land. 1/5 of an acre can feed two people …

        Comment by Robert Mitchell— 5 Mar, 2018 #

  4. MMT’s Bill Mitchell (no relation) recently posted an exhaustive three-part attack on Wren-Lewis’s model (with Portes) of a fiscal rule for the Labour Party. See http://bilbo.economicoutlook.net/blog/?p=38776
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    My favorite part:
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    “2. Then we read the “government would like to minimise these costs … [from the taxes] … but they need taxes to pay for government spending … and any interest on debt …”
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    Which is an absolute lie in terms of the intrinsic nature of a monetary system where the national government issues its own currency.”
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    I differ from MMT in several respects, but agree that deficits should not matter and taxes are not necessary for government spending. I like Bill Mitchell’s strong, blunt, and easy-to-read though rather long-winded way of confronting Wren-Lewis’s model on a point-by-point, variable-by-variable basis. Mitchell is dissecting the mainstream model and tearing it apart bit by bit …
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    I disagree with MMT that taxes withdraw money from the economy because the tax money is either immediately spent or invested and therefore spent by banks. MMT uses taxes in its model to control inflation; I rather see inflation as psychological, connected to money supply only if people want it to be. In my view indexation of all incomes to price rises is a better way to deal with unwanted effects of potential undesired inflation.
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    I also disagree with MMT about a Job Guarantee; I prefer basic income.

    Comment by Robert Mitchell— 4 Mar, 2018 #

  5. Well said! Nice picture making reference to the movie Matrix which then illustrate the almost existential difficulties for MMT´ers to reach out to ordinary people against the neoliberal agents dressed in black.

    Comment by ThorLeif— 4 Mar, 2018 #


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